Outsourcing: Volume and Composition of R&D

This paper examines the impact of the outsourcing of production on the volume and composition of the home country's research and development (R&D). We find that outsourcing decreases the process R&D of the multinational firm in large markets when it only conducts process R&D (the substitution effect between outsourcing and process R&D). Outsourcing tends to emerge as a complementary factor to product development when the multinational firm conducts both product R&D and process R&D (the complementary effect between outsourcing and product R&D) under some conditions. This implies that international outsourcing has a different effect on product innovation and process innovation.     

Stochastic programming approach to re-designing a warehouse network under uncertainty

The warehouse network re-design problem includes integrating or eliminating existing warehouses and establishing new sites. In this paper, we incorporate variability in product demand and operational costs with a two-stage stochastic modeling approach. We use the Sample Average Approximation (SAA) approach together with Benders decomposition to provide a solution method. Our results indicate not only that the stochastic solution is an improvement over the deterministic solution but also that the solutions’ differences grow with increasing uncertainty. The stochastic solutions show more robustness than the deterministic solutions. The computational results show that a change in the type of probability distribution of the stochastic parameters does not significantly affect the value of the stochastic solutions.     

Floods,food security,and coping strategies: Evidence from Afghanistan

In this paper, we assess the long‐term effect of floods on food security (as measured by calorie and micronutrient consumption) by applying an instrumental variable approach to data from the Afghanistan National Risk and Vulnerability Assessment survey. To identify the determinants of this effect, we also estimate how floods affect per capita yearly household income and poverty status. We find that exposure to flooding during a 12‐month period decreased daily calorie consumption by approximately 60 kcal while increasing the probability of iron, vitamin A, and vitamin C deficiency by 11, 12, and 27 percentage points, respectively. Controlling for price shocks and income only marginally reduces this flood effect on food security, suggesting that impaired livelihoods (rather than price hikes) are its primary driver. We further determine that exposure to this natural disaster decreases income by about 3% and makes flood‐affected households about 3 percentage points more likely to be poor. Lastly, we show that experience of floods is strongly and significantly associated with lower diet quality and quantity, and with engaging in consumption smoothing coping strategies, such as buying food on credit and taking loans. These findings underscore the serious direct impact of floods on both diet and effective behavioral responses to such shocks while emphasizing the need for targeted micronutrient supplementation in disaster relief and food aid measures even after the period of natural disaster emergency.     

Unemployment governance,labour cost and earnings management: Evidence from China

This study investigates the effect of labour cost on earnings management based on the panel data of listed firms in China. We use the average wage of employees in firm level as the proxy for labour cost. Firms with rising labour cost become more likely to engage in negative earnings management to conceal profits or report losses. The effect becomes more significant in state-owned enterprises, labour-intensive enterprises, firms in high unemployment-rate regions and firms with political connections. Further research finds that, under the institutional background of Chinese unemployment governance, firms get more government subsidies and tax preferences and reduce the excessive employment through negative earnings management. To a certain extent, this weakens the policy effect of unemployment governance. Overall, our conclusions are meaningful to the reform of unemployment governance, the standardisation of earnings management behaviour, the improvement of the government subsidy policies and the improvement of the efficiency of public resource allocation.     

Asymmetric impacts of disaggregated oil price shocks on uncertainties and investor sentiment

This paper aims to examine short- and long-run asymmetries in the impacts of disaggregated oil price shocks on economic policy uncertainty, stock market uncertainty, treasury rates, and investor (bullish and bearish) sentiment in the US. To this end, we use a nonlinear auto-regressive distributed lag cointegration approach, which allows us to capture both positive and negative disaggregated oil shocks. We find that oil demand shocks are the main drivers of both measures of uncertainty, while oil supply shocks affect treasury rates. However, both oil demand shocks and oil supply shocks affect investor sentiment, with certain differences in the effects of positive and negative shocks. The overall effects of both oil demand and supply shocks—whether positive or negative—are stronger in the long-run than in the short-run. Additionally, we apply rolling causality and reveal evidence of a rather homogenous causal flow from disaggregated oil shocks to the variables studied, particularly around global stress periods. Our findings have implications for asset pricing and portfolio risk management and suggest policy formulations that differentiate between disaggregated positive and negative oil price shocks.

     

Unemployment Benefits and Entrepreneurship

Several recent empirical papers show that unemployment benefits crowd out nascent entrepreneurs. In the present paper provide theoretical support in favour of this interesting result. Over fairly general preference patterns we obtain a measure of the opportunity cost of entrepreneurs in the presence of unemployment benefits and derive conditions under which potential entrepreneurs suffer as unemployment benefits rise. We formulate a clear transmission mechanism in the labour market that links unemployment benefits to occupational choice for a group of risk‐averse individuals.     

Examining cross-cultural compatibility of high performance work practices

This paper examines the relationship between high performance work practices (HPWPs) and cross-cultural dimensions to debate the effectiveness of HPWPs in cross-cultural settings. Using systematic review, 140 articles were identified on HPWPs and cross-cultural human resource management. Synthesizing the two literature areas results in four key findings. Many HR practices labelled as HPWPs are affected by national cultural dimensions. Also, several practices labelled as HPWPs have not been a part of the cross-cultural HR literature, and that limited studies in both area focus on the impact of cultural compatibility on outcomes. Finally, a few selected cultural dimensions have dominated the cross-cultural HR literature. Thus, more work is needed to: understand the role of national culture on effectiveness of HPWPs; increase coverage of HPWPs in the cross-cultural HR literature; understand the impact of cultural compatibility of HR practices and HPWPs on outcomes; and, incorporate additional cultural dimensions in future work.     

TTIP – Probleme und Chancen

The Transatlantic Trade and Investment Partnership is the most important trade policy decision that European leaders have faced in many years. The new generation of free trade agreements, including TTIP, aim at deep economic integration. Thus, they are essentially focused upon the removal or alignment of standards, regulations and administrative procedures that impede international trade and investment. Therefore, TTIP goes beyond the dimensions of traditional preferential trade agreements in the sense that it not only concerns tariffs and non tariff barriers to trade in goods, but it also concerns trade in services and the foreign investment environment. Regulatory cooperation under TTIP might thus well extend into core domains of public policy, including health and food safety or environmental regulation. Regulation, however, confers both benefits and costs to society. A proper assessment of TTIP must therefore also consider the benefits of regulation to society and must embed regulatory cooperation between the EU and US into a firm democratic framework. The potential of such an agreement is substantial, due to improved market access, regulatory cooperation and greater global reach, while the downside risk is limited. While some of the arguments critical of TTIP are justified, others seem rather excessive and seem intent on stirring up unnecessary anxiety among the population. An objective and constructive discussion is crucial to ensure that the needs of the population are heard during the negotiation process and that an agreement capable of achieving majority support can be concluded. The debate over TTIP has to consider not only the economic effects of increased trade but also the legal and political dimensions of the trade agreement.     

Earnings quality and corporate cash holdings

Poor earnings quality exacerbates information asymmetry between internal and external stakeholders of a firm. Agency considerations then persuade investors to discount the value of corporate cash holdings out of concern about the inappropriate use of funds. In this study, we show that poor earnings quality has a negative impact on the value of corporate cash holdings and a positive impact on the level of cash reserves. We find that the negative effect of poor earnings quality either neutralizes or more than offsets the positive effect of excess cash on firm value. Our results are robust to several measures of earnings quality and model specifications.